Here is a good reason on why you should concentrate on Stocks rather than Bonds and CDs.....because of the dividends. This video will reveal the best 3 companies that you should invest in to take advantage of their wonderful stock increase.
Dividend Stocks Pay You to Own Them
Consider that $10,000 invested into the S&P500 between 1926 and 2004 would have grown to a little over $1,000,000 without dividends. This is not bad, but with dividends reinvested, that same amount would have grown to a little over $24,000,000! The power of dividend reinvesting and stock splits over time is amazing!
Think about owning a diversified portfolio of stocks that pays you to invest, in the form of dividends. Do you own a credit card? Well then you probably understand how fast interest expense can add up, becoming a financial nightmare. The opposite is true with dividend investing and how fast your dividend income can add up. Even better, when dividend paying companies you own increase their dividend payouts, your income increases! There are many questions to ask when investing in dividend paying stocks some of which are:
*How long has the company paid dividends ? (Check the dividend yield and history)
There are amazing dividend paying companies such as Colgate Palmolive (NY:CL) (yield 2.0%) that have paid dividends every year since 1895 or Proctor & Gamble (NY:PG) (yield 1.9%) since 1891. These tremendous dividend histories confirm the companies’ commitment to paying dividends. Normally dividend histories of 5 to 10 years plus are considered good.
*Are the dividends sustainable ? (Check the dividend payout ratio)
There are companies which have good dividend payout ratios like 3M (NY:MMM) which pays out 40% or Johnson & Johnson (NY:JNJ) which currently pays out 38%. The payout ratio is a tool that helps investors determine if the company has sufficient funds for maintaining dividend payouts. Normally a payout ratio below 70% is acceptable.
*Are the dividends growing ? (Check the dividend growth rate)
There are companies, such as Sysco (NY:SYY) that have raised its dividends by over 400% during the 10 year period from 1995 to 2005. Sterling Bancorp (NY:STL) raised its dividends over 500% during the same 10 year period! Normally dividend increases that exceed inflation are considered good.
A potential investing strategy is to buy a diversified basket of high quality dividend payers which consistently raise their dividends. Reinvest the dividend income you receive to buy more shares and repeat the cycle to create your own dividend compounding money machine.
